9 VALUE ADDED TAXATION
(a)
(30885)
12886/09
COM(09) 427
(b)
(30887)
12889/09
+ ADD 1
COM(09) 428
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Draft Council Regulation on administrative cooperation and combating fraud in the field of value added tax (Recast)
Commission Report on the application of Council Regulation (EC) No. 1798/2003 concerning administrative cooperation in the field of value added tax
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| Legal base | (a) Article 93 EC; consultation; unanimity
(b) —
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| Documents originated | 18 August 2009
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| Deposited in Parliament |
(a) 4 September 2009
(b) 7 September 2009 |
| Department | HM Treasury
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| Basis of consideration |
EM of 29 September 2009 |
| Previous Committee Report |
None |
| To be discussed in Council
| Not known |
| Committee's assessment | Politically important
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| Committee's decision | (a) Not cleared; further information requested
(b) Cleared
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Background
9.1 The main instrument governing the exchange of information
and assistance in VAT matters is the Administrative Cooperation
Regulation (Council Regulation (EC) No 1798/2003). This has been
amended on a number of occasions, most recently in late 2008.
The Regulation is therefore in need of consolidation.
9.2 Council Regulation (EC) No 1798/2003 requires
the Commission to report on the functioning of the Community's
VAT administrative cooperation system and arrangements.
The documents
9.3 The draft Regulation, document (a), is to recast
(consolidate and amend) the existing Administrative Cooperation
Regulation. The proposal sets out the Commission's aim of providing
Member States with the means for efficient and well organised
administrative co-operation procedures on VAT issues to combat
cross-border VAT fraud more effectively and for better collection
of VAT in cases where the place of taxation is different from
the place of establishment of the supplier.
9.4 The draft Regulation would recast the present
Regulation to take into account changes that have already been
agreed in other instruments, align, reorder and harmonise existing
legal text, introduce new measures and extend the role of the
existing comitology[38]
committee (the Standing Committee on Administrative Cooperation)
to some of the new elements. The key measures include:
- common minimum standards for
Member States when registering and deregistering traders for VAT;
- giving authorised personnel in other Member States
automatic access to certain data on VAT registered businesses
held by a Member State;
- allowing authorised tax authority personnel access
to another Member State's summary intra-Community trading information
and certain other data;
- Eurofisc — the main function of which will
be to provide a fast-track network for exchanging specified data
between Member States and to provide an early warning system of
possible fraud; and
- an enhanced VAT number verification system to
help businesses verify their Community customer's details.
Other changes include:
- establishing the principle
that Member States are collectively responsible for helping each
other to secure their VAT revenues;
- a requirement that tax authorities provide each
other with feedback on the value of the information which they
exchange;
- clarification of existing legislation to facilitate
greater use of cooperation tools and to remove inconsistencies
of interpretation.
9.5 The Commission Report, document (b), is the triennial
one, required by the Administrative Cooperation Regulation, concerning
administrative co-operation in the field of value added tax. The
Commission has presented it together with the draft Regulation,
document (a), as it provides evidence for the proposed legislative
changes. There have been five previous reports on the functioning
of the Community's VAT administrative cooperation system and arrangements.
However, this is the first report since introduction of the 2003
Regulation which contained new provisions that:
- set out clear and binding rules
for VAT administrative cooperation between Member States;
- allowed direct contact between tax offices, making
cooperation more efficient and quicker; and
- permitted automatic and spontaneous exchange
of information in high risk areas in order to combat specifically
VAT fraud.
9.6 In the report the Commission explores a range
of measures that if adopted would substantially affect the functioning
of VAT administrative cooperation in the future. Its main findings
are that:
- authorised staff should have
automatic access to a defined set of data (for example,. business
name and address and VAT registration date) in any Member State,
rather than sending a series of requests for such information;
- networks of fraud specialists should be established
(that is Eurofisc) to provide a solid framework for enhancing
rapid exchanges of specific information in areas of high fraud
risk, with the primary aim acting as an early warning system to
identify fraudsters; and
- there is a need for improved functionality, quality
and accuracy of the VAT data stored on the VAT Information Exchange
System (VIES), particularly the validity and checking of VAT Registration
Numbers (VRNs) and the speedy and accurate correction of data.
9.7 The Commission concludes that:
- not all Member States make
full use of the existing legal provisions,
- nevertheless, overall administrative cooperation
between Member States has improved and the 2003 Administrative
Cooperation Regulation provides a solid base for Member States
to exchange information;
- there are, however, a number of areas that lack
clarity or are optional as to their application and as a consequence
the level of administrative cooperation is not commensurate with
the size of intra-Community trade; and
- the legal framework therefore needs to be updated
and reinforced to ensure the smooth functioning and efficient
management of administrative cooperation procedures.
9.8 The Commission Report is accompanied by a Staff
Working Document, analysing and summarising Member States replies
to a questionnaire relating to the application of Council Regulation
(EC) No 1798/2003, which was a major source of information for
the report itself.
The Government's view
9.9 The Financial Secretary to the Treasury (Mr Stephen
Timms) says that fighting VAT fraud remains a priority for the
Government and it therefore welcomes the Commission's proposal
and supports many of the measures it contains. He continues that:
- the Government agrees that
it is important for Member States to cooperate effectively to
prevent fraudsters from abusing the EU VAT system;
- it notes that improving levels of cooperation
between Member States can achieve anti-fraud benefits without
imposing additional burdens on business;
- it will consider the detail of the proposal,
and any issues arising during negotiations, using the same criteria
it has applied to previous similar proposals — that any
measures to be adopted must be effective at tackling fraud, without
creating new fraud risks, and that they must not place any unreasonable
additional burdens on business;
- by reference to these criteria the Government
has reservations over some elements in the draft Regulation;
- these primarily centre on the proposed measures
for introducing common minimum standards for VAT registration
and deregistration; and
- as the proposal stands it is unlikely that an
Impact Assessment will be required for the recasting proposal,
but until clarification has been obtained in discussions as to
the scope of some of the measures, this is not certain.
Conclusion
9.10 Cooperation between Member States to counter
VAT fraud is clearly important, and rationalising and improving
legislation facilitating that cooperation would be welcome. However,
we note the Government's reservations about the detail of the
draft Regulation. So before considering that document further
we should like to hear about developments on these points in the
negotiations and to see, if the need for one emerges, any Impact
Assessment.
9.11 Thus, whilst we clear the Commission Report
on the functioning of administrative cooperation, document (b),
the draft Regulation, document (a), remains under scrutiny.
38 Comitology is the system of committees which oversees
the exercise by the Commission of powers delegated to it by the
Council and the European Parliament. Comitology committees are
made up of representatives of the Member States and chaired by
the Commission. There are three types of procedure (advisory,
management and regulatory), an important difference between which
is the degree of involvement and power of Member States' representatives.
So-called "Regulatory with Scrutiny", introduced in
July 2006, gives a scrutiny role to the European Parliament in
most applications of comitology. Back
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